Inflation signs reappearing

U.S. inflation pressure picked up again in March, even as unemployment held at 4.3%, complicating the case for a near-term Federal Reserve rate cut. (bls.gov) The Producer Price Index, which tracks what businesses receive for their goods and services, rose 0.5% in March and was up 4.0% from a year earlier. That was the fastest 12-month increase since March 2023. (bls.gov) Much of the monthly jump came from goods prices, which climbed 1.6% in March, led by an 8.5% increase in energy prices and a 15.7% surge in gasoline. Final-demand services were unchanged for the month. (bls.gov) Consumer inflation also ran hot in March: the Consumer Price Index rose 0.9% for the month and 3.3% from a year earlier, while core consumer prices excluding food and energy increased 0.2% on the month and 2.6% on the year. (bls.gov) The labor market has not softened enough to offset those price readings. Nonfarm payrolls increased by 178,000 in March, and the unemployment rate was little changed at 4.3%, with hiring concentrated in health care, construction, and transportation and warehousing. (bls.gov) The Federal Reserve left its benchmark rate unchanged on March 18 at 3.5% to 3.75% and said inflation remained “somewhat elevated.” In the same statement, policymakers said job gains had remained low but the unemployment rate had been little changed in recent months. (federalreserve.gov) Fed officials’ March projections showed they expected core Personal Consumption Expenditures inflation at 2.8% at the end of 2026, above their 2% target, with unemployment at 4.4%. Those forecasts were published before the latest March inflation reports. (federalreserve.gov) Growth is still positive, but some gauges have cooled. The Atlanta Fed’s GDPNow model estimated first-quarter real gross domestic product growth at a 1.3% annual rate on April 9, down from 2.3% on March 19. (atlantafed.org) That leaves the Fed facing the same tradeoff it has been trying to avoid since last year: inflation data that argue for patience, and growth data that no longer look especially strong. The next major test comes with the April 30 gross domestic product report and the next Fed meeting on May 5-6. (atlantafed.org)